What is the Building Safety Levy?
The Building Safety Levy (Levy) is a new government measure that will apply to relevant residential and mixed-use developments in England where a building control application is submitted on or after 1 October 2026. Introduced under the Building Safety Act 2022, it is intended to raise £3.4 billion over the next decade to fund the remediation of critical building safety defects, such as cladding-related issues.
The Levy will apply to residential developments including private housing developments, build-to-rent schemes, and purpose-built student accommodation. The policy forms part of the government’s broader effort to ensure that the costs of addressing historic safety failures are borne by the development industry, rather than by taxpayers or leaseholders.
The Levy is designed to sit alongside the building control approval process, rather than the planning process. Local authorities will be responsible for collecting the Levy and will not issue building control completion certificates until the Levy liability has been discharged.
How is the Building Safety Levy calculated?
The amount payable will be calculated by reference to the gross internal area of new floorspace, including (where applicable) communal areas. Levy rates will be set locally and will vary between authorities to reflect differences in residential property values across the country. The government’s objective here is to avoid disincentivising development in particular geographical locations by maintaining a Levy rate which remains proportionate to local market condition. In addition, developments on brownfield land will benefit from a 50% discount.
Developers will be required to provide information, such as gross internal area, to the relevant local authority to enable the Levy to be assessed at the building control application stage. Once the calculation has been made, the authority will issue a Levy liability notice setting out the amount payable by the developer. A developer that fails to pay the Levy will be unable to obtain the necessary completion and final certificates for the development, essentially preventing occupation of the development until the Levy has been paid.
Are there exemptions?
Developments comprising fewer than 10 new dwellings or 30 new bedspaces for purpose-built student accommodation are exempt. In addition, several categories of buildings are exempt from the Levy including social and supported housing as well as a range of community and public service facilities such as hospitals, care homes and hotels. The intention is to ensure that the Levy is targeted at developments capable of bearing the additional cost without discouraging the delivery of essential services or social housing.
Implications for developers and landowners
For developers, the Levy will become another notable development cost to be factored into project appraisals alongside Community Infrastructure Levy payments, section 106 obligations and other planning-related contributions. The Levy may therefore affect land values, scheme viability and the premium a developer is prepared to pay for a site, particularly in competitive bidding scenarios.
Landowners ought to therefore be aware that the Levy may influence purchasers’ pricing assumptions and willingness to proceed on certain terms. As the market adjusts to the new regime, parties may also seek to address the Levy expressly in transaction documents, including through price-adjustment mechanisms, conditionality or risk-sharing provisions. This may be particularly relevant where an agreed purchase price is based on a specific development appraisal or viability assessment. Parties will also need to consider the possibility that the final Levy liability may differ to that initially calculated.
Special thanks to Alexander Moir for their help with this article.
This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.
© Farrer & Co LLP, September 2026
Source: www.farrer.co.uk
